Britain Backpedals on Privatized Milcom Satellites

LONDON — Twelve years ago, the British government revolutionized the process of purchasing military satellite telecommunications by outsourcing it all to the private sector. Now Britain appears about to return to conventional procurement for its follow-on satellites as a way to put off a longer-term decision, British government and industry officials said.

All Skynet assets will become the property of the British government as of August 2022 unless the contract with Airbus Defence and Space is renewed.

The government’s decision, now being refined, appears to be leaning toward a more-limited commitment to gapfiller satellites to succeed the current Skynet 5 X- and UHF-band satellites.

Under a contract that many thought would set a precedent for other governments but never did, the British Defence Ministry in 2003 contracted with what is now Airbus Defence and Space for the Skynet 5 system of nuclear-hardened, encrypted military satellites.

Under the contract, valued at 3.6 billion British pounds ($5.6 billion) to mid-2022, Airbus operates the four Skynet 5 satellites that it paid for and launched, in addition to four older Skynet 4 spacecraft that were transferred to it from the British Defence Ministry.

British defense officials over the years have said they were happy with the contract, with enables the government to benefit from regular technology-refresh, as provided in the contract, without having to budget for a large capital expenditure that would accompany satellite purchases.

The Skynet 5 contract ends in August 2022, a date that is increasingly on the minds of both the British defense authorities and Airbus officials. Over the years, Airbus has gradually taken over so much of what was a government operation that extricating the company from the system will be no easy task.

The ability to do exactly that is one reason why the contract included the provision that all the Skynet assets will become the property of the British government as of August 2022 unless the contract is renewed.

Airbus officials have been urging the government to renew the contract sooner than that to give the company time to start work on a Skynet 6 constellation.

The last Skynet 5, the Skynet 5D, was launched in 2012 as part of a contract extension that at the time was viewed as government endorsement of the service contract’s value. The first three were launched in 2007 and 2008.

British Defence Ministry officials attending the Global Milsatcom conference here Nov. 3-5 said they are nearing a decision on what to do when the current contract ends.

They said no decision had been made, but that one of the options being considered is the procurement of one satellite, to be followed by another a couple of years later in a second procurement.

Air Commodore John Philliban, head of the Joint User group at the British Defence Ministry’s Joint Forces Command, said the government’s Future Beyond Line of Sight policy is being crafted now and would be the subject of an interim assessment by the end of this year.

A more formal report would be issued by mid-2016.

Philliban said a simple continuation of the contract, or the replacement of Airbus by another company operating under similar terms, remains an option. But he stressed the advantages to the government of buying a satellite of its own around 2019.

Philliban said this satellite, which could be launched in 2021 or 2022, would extend the Skynet 5 constellation’s in-orbit life by several years given that the in-orbit health of the newer Skynet 5 spacecraft. A second satellite would be procured a year or two later, this one likely carrying enhanced features including a possible Ka-band payload.

A second option is to conclude a service-provision agreement with a commercial company, either Airbus or a replacement. The depth of Airbus’s integration with British defense forces that has occurred during the Skynet 5 contract means any divorce between Airbus and its customer was going to be complicated.

Philliban said the ministry’s assessment of life after August 2022 “has increased our confidence that it is indeed feasible for a competitor to bid for this contract.”

But he also conceded the difficulties. “The entire Skynet system reverts to MoD ownership, and this will present different challenges to the existing contracting relationship,” he said. “The existing Skynet 5 satellites would be provided as government-furnished equipment to the new service provider.”

Philliban did not suggest that the ministry has become disenchanted with the Skynet 5 relationship between the service provider and its customer – a model that has been much debated in other European nations, especially France.

French government officials have said British authorities are paying too much for the Skynet 5 service. British officials and Airbus have responded that France and other governments do not realize how much they are paying by maintaining government staffs on the payroll to manage these nations’ military telecommunications service given how dispersed the cost base is in their bureaucracies.

Philliban hinted that one reason favoring a decision to purchase two satellites in a conventional government procurement process is to buy time before deciding what the government wants over the long term.

“The ability to give us that out-of-service date extension, and perhaps to have a look at emerging capabilities, is more acceptable,” he said. “It gives us additional breathing room.”